December 2013

In this issue:

  • The IRS announced the release of Publication 526, titled “Charitable Contributions,” which explains how to claim a deduction for charitable contributions, and discusses organizations that are eligible to receive deductible charitable contributions.
  • According to the Minnesota Gambling Control Board, pull-tabs, bingo and other forms of charitable gambling is up 8.6% in this fiscal year. It is the biggest percentage increased in more than 20 years with receipts expected to top $1 billion.
  • The Pittsburgh Business Times reported that two of the state’s legislators are asking the Pennsylvania Attorney General to investigate the University of Pennsylvania Medical Center’s nonprofit status because of the institution’s attack on bills they sponsored, which would allow patients to get care at big health systems regardless of the insurance plan.

Federal

INTERNAL REVENUE SERVICE (IRS).
President Obama has nominated John Koskinen to head the IRS.  Mr. Koskinen recently voiced concerns over the published reports about the diversion of a significant amount of assets from charitable organizations.  He was quizzed on the subject in writing by members of the Senate Finance Committee, and he pledged to look into the cases that come to public attention.
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In late November, the IRS issued proposed new guidelines on the requirements to qualify as a tax-exempt social welfare organization under § 501(c) (4).  The Treasury and the IRS are seeking feedback to assist in providing more clarity on this category of exempt organizations.

Comment: Anyone who has followed these issues knows that a great deal of publicity has been showered upon the IRS on the propriety of certain organizations occupying tax-exempt status under § 501(c) (4). This is the IRS’ reaction in trying to address the issue.

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The IRS announced the release of Publication 526, titled “Charitable Contributions,” which explains how to claim a deduction for charitable contributions, and discusses organizations that are eligible to receive deductible charitable contributions. 

State

INDIANA.
A well-known national veterans organization has filed a federal lawsuit against an Indiana-based organization which “lambasted” the group on its own website.  The language on the Indiana-based organization’s website called the veterans’ organization a “fraud” calling for an immediate investigation.

MINNESOTA.
According to the Gambling Control Board, pull-tabs, bingo and other forms of charitable gambling is up 8.6% in this fiscal year.  It is the biggest percentage increased in more than 20 years with receipts expected to top $1 billion.

MISSOURI.
Several St. Louis nonprofits, which received federal grants to help people sign up for insurance under the Affordable Care Act, are suing the State of Missouri.  The lawsuit claims that there are various provisions in the state’s law which, “prohibit some plaintiffs from performing the duties required of them by the Affordable Care Act, prohibit other plaintiffs from providing information about health insurance altogether, prevent plaintiffs and the Missouri public from receiving information about health insurance from the person or source of their choosing.”

NEW HAMPSHIRE.
Lucrative charitable gaming events may be coming to an end in 2014.  State law makers are expected to take action next year to legalize commercial casinos.  Those operating charitable gambling events fear that it will drastically reduce, or make impractical, charity sponsored events.  Nearly 400 nonprofit groups conduct such events in the state. 
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The interim director of Charitable Trusts in the state is Anne Edwards, an associate attorney general.  This year, for the first time, the state issued a mandated report on fundraising costs in the state.  A new law requires reports to be posted in a “searchable format” on the state’s website.  The report highlights a number of donor acquisition campaigns, where major organizations received little or no money.  New Hampshire is encouraging its residents to support local organizations.

NEW MEXICO.
The Registrar for the Office of the Attorney General announced that effective January 2014, their office will no longer accept hard copy documents pertaining to professional fundraisers.  The notice provides an e-mail address for sending bonds, consent to process, as well contracts, scripts and the like.  Heather Winkel is the Registrar and her telephone number is (505) 827-6959.

NEW YORK.
The Wall Street Journal reported that the nonprofit arm of Pearson, Inc. has agreed to pay $7.7 million to settle an investigation by the New York Attorney General’s Office on whether it improperly sent government employees on international junkets.

NORTH CAROLINA.
Here is a great new idea.  Television station WRAL in Raleigh reported that a Durham charity, which works with the poor, is selling the naming rights to the distribution of gifts it gives to those it serves.

OHIO.
John Donald Cody, also known as Bobby Thompson, the man who ran the U.S. Navy Veterans Association received a prison sentence of 28 years.

OREGON.
A Texas couple was found guilty in federal court in Portland and sentenced to a year and one day in prison, and ordered to make $1.1 million in restitution and fines.  The couple used a children’s charity for Iran to launder money back to the country to make investments in their own personal name.  In addition, they backdated donations and claimed a tax deduction on their income tax returns in this country.  The authorities accused them of money laundering and violating the Iran embargo.

PENNSYLVANIA.
The City of Pittsburgh has struggled for years with major nonprofits seeking arrangements for payments in lieu of taxes.  The Pittsburgh Public Service Fund served that purpose and generated $2.6 million in 2013 for the state, but the fund is being terminated at the end of the year.  The mayor-elect of Pittsburgh is now pressuring the major nonprofits in the city to enter into a long-term commitment to help finance the city’s services on a voluntary basis. 
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The Office of the Attorney General has taken legal action against board members of two organizations for their alleged mismanagement of assets.  The state claims that the board members of one organization breached their fiduciary duty by failing to pay taxes, and to maintain fire insurance on the facility that was destroyed by fire.  In the other case, the Office of the Attorney General is taking action in connection with a foreclosure, due to the organization’s unpaid mortgage bills. 
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A Philadelphia sports media personality is the subject of a series of questions about money he raised for a trip which never took place to help support wounded veterans, who never received any portion of the proceeds.  To make matters even “murkier,” the charity involved was not registered with the IRS, and the celebrity has a history of previous missteps involving the use of charitable organizations.  To date no charges have been filed.
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It has been reported by local media that the Carnegie Museums of Pittsburgh are proposing buyouts to seven of their curators as one of the ways to adjust their budget deficit of more than $1 million per year.

Comment: It is most unusual for charitable organizations to enter into buyout agreements with key employees as a way to address budget deficits.  It is certainly a sign of the times.

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The Pittsburgh Business Times reported that two of the state’s legislators are asking the Pennsylvania Attorney General to investigate the University of Pennsylvania Medical Center’s nonprofit status because of the institution’s attack on bills they sponsored, which would allow patients to get care at big health systems regardless of the insurance plan.

TENNESSEE.
It is with sadness that we report the passing of Marie Bodaford, a long-time employee with the Office of the Secretary of State.  She was a kind and gentle woman, and will be missed by everyone who knew her.

TEXAS.
The Associated Press reported that a top executive of the state’s $3 billion cancer fighting effort has been indicted over improperly awarding a $11 million taxpayer-funded grant without it being subjected to review or analysis.  The executive is charged with securing the execution of a document by deception.  A grand jury failed to return charges against any of the other parties involved.

WASHINGTON.
A lawyer who led a frugal life, and known for being eccentric, surprised everyone by leaving $187.6 million to the Seattle Children’s Hospital, the University of Washington School of Law, and the Salvation Army.  According to a report in the Seattle Times, only a tight circle of family and friends knew he had amassed a fortune prior to his death at the age of 98.

WISCONSIN.
Gannett Wisconsin Media examined IRS records for fifty-one active or recently closed charities tied to Wisconsin athletes or teams.  It found that the charities of six former Green Bay Packers have had their charities’ tax-exempt status revoked in recent years for failing to file returns.  When contacted, one of the former football players said he no longer intended to run his own charity because it was “more work than he expected.” 
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The transition of the registration services to the Wisconsin Department of Financial Institutions continues to move forward; albeit with numerous issues to solve.  Ganell Fibikar is the new director of charity registrations.  She may be contacted at (608) 266-8891.

Other
BEST LAWYERS RECOGNITION.
The law firm of Copilevitz & Canter, LLC earned recognition in 2014 Best Law Firms for its work in First Amendment law.

CHARITABLE GIVING.
Individuals in the U.S. donated approximately $28.93 billion in 2012.  This represented a 3.9% increase over 2011 for U.S. households and individuals.  More than two-thirds of U.S. households give to charitable causes annually.  Seventy percent of charitable giving came from individuals, 15% came from foundations, 7% came from bequests, and 6% came from corporations.

HOUSING ALLOWANCE CHALLENGE.
The Freedom From Religion Foundation filed a lawsuit in U.S. District Court for the Western District of Wisconsin, challenging the clergy housing exclusion when clergy provide their own residence.  The court ruled in late November that the law violates the Establishment Clause because it lacks a secular purpose and effect.  The ruling does not impact clergy living in housing provided by the institution or church.

INDUSTRY LOSS.
Russ Reid, founder of the direct marketing firm, Russ Reid, passed away on December 7, 2013, at his home in California.  Russ Reid started his firm in 1964, and it became one of the nation’s largest direct response firms, specializing in representing nonprofits.

ROBERT REICH COMMENTARY.
On December 17, 2013, a commentary written by Robert Reich appeared in many papers across the country.  Mr. Reich is the former Secretary of Labor, and is currently a professor of public policy at the University of California at Berkley.  Mr. Reich noted that according to the Congressional Budget Office, $33 billion of last year’s $39 billion total charitable deductions went to the richest 20% of Americans.  While noting that some of the family foundations do a great deal of good for the poor, he went on to say, “A large portion of the charitable deductions now claimed by America’s wealthy are for donations to cultural places - concert halls and art museums - where they spend their leisure time hobnobbing with other wealthy benefactors. . . Another portion is for contributions to elite prep schools and universities they once attended or want their children to attend.”  His commentary went on to raise the question of what the word “charity” should mean.  The essence of his commentary being that when Congress gets around to reviewing the tax code, they would be wise to look at the distinction between cultural institutions and charities that help those in needs.

THE EFFECT OF LIMITING THE CHARITABLE DEDUCTION.
The American Enterprise Institute predicted in a December that the proposed limit on the charitable deduction would significantly reduce donations and result in serious harm to many nonprofits.

UNITED KINGDOM.
In another example of how we are not unique, the BBC reported that a member of the House of Lords is facing allegations by a nonprofit group, which he helped to establish, that he misappropriated more than $1 million.